Skyrocketing demand for e-commerce goods has developers
striving to deliver industrial logistics product in the face of land
scarcity, construction costs and other barriers BY LISA BROWN

While all US regions displayed stronger activity in late 2017 and
early 2018, the West is surging due to underlying drivers and capacity constraints. Specifically, West Coast imports increased by 11.7%
year-over-year in the first quarter, according to Prologis. High barriers to new supply, access to key global trade gateways and healthy
economic growth all support outperformance. As such, the West
Coast has become the most capacity-constrained region, with 3.4%
vacancy as of fourth-quarter 2017.

“Chicago, Philadelphia, Atlanta, Dallas-Fort Worth, Cincinnati,Indianapolis, Central Florida—they’re all seeing a lot of activitywith e-commerce and big-box distribution being built at record-high asking rates,” observes Pete Quinn, national director of indus-trial services with Colliers International. “It’s just a very good mar-ket but the two that stand out are Southern California, andNorthern and Central New Jersey, the two largest markets as far assquare footage. Both have ports and rail, which help in last-miledelivery and give them a huge advantage, logistics-wise.”“New York and New Jersey have completed upgrades to portsfor distribution crossing the Panama Canal after the expansion ofa third lock a couple of years ago,” reports Quinn. “Ports canhandle much larger vessels crossing the Panama Canal, so it hasrelieved some congestion from Southern California, specificallythe Long Beach port. That’s another reason New York and NewJersey are seeing so much activity.”Indeed, the top US markets for rental growth in descendingorder are New Jersey/New York City, Seattle, Southern California,the Bay Area, Portland, Las Vegas, Central Valley, Denver,Pennsylvania and Nashville. For example, net effective rentgrowth ranged from nearly 8% in Denver to more than 15% inSeattle last year, according to Prologis.

Prime logistics rents—the highest achievable rates for top-quality warehouse and distribution-center space—increased by 3.2%
globally in the first quarter from a year earlier, according to CBRE.
That exceeds the previous 12-month period’s 2.2% increase. Four
of the 10 logistics hubs registering the largest Q1 prime rent gains
are in North America. The biggest gainer was Vancouver, up 29.1%
due to its dearth of industrial land, while Oakland (14% increase),
Seattle ( 13.4%) and New Jersey ( 9.5%) were the top 3 in the US.